Beyond Structured Settlements

S2P2J Release 54

Publisher Law Journal Press anticipates an October 2013 distribution date for hardcopy supplements for Release 54 of "Structured Settlements and Periodic Payment Judgments" (S2P2J) with online S2P2J subscribers receiving their update simultaneously at no additional charge.

Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

First published in 1986 and updated semi-annually, S2P2J is co-authored by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs. 

Release 54 Highlights - Release 54 will feature new, updated and/or expanded sections addressing the following structured settlement topics:

• Negotiating structured settlements vs. cashing out
• Defendant disclosure issues
• Business practices of consultants
• Insurance company insolvencies
• Medicare set-aside arrangements
• Re-cycled structured settlement payment rights
• Securitization of structured settlement payment rights
• Australia structured settlement update

Negotiating Structured Settlements vs. Cashing Out - Why and when should defendants agree to structured settlements as opposed to lump sum settlements? Do defendants save money using structured settlements and, if yes, why and how? Do structured settlements result in additional costs and risks for defendants and, if yes, how do defendants reduce these costs and risks? Release 54 examines these questions in the context of existing state statutes and case law and offers recommendations for defendants when they review their traditional structured settlement policies and business practices. The recommendations include new sample structured settlement Mission and Disclosure Statements for liability insurers.

Defendant Disclosure Issues - Release 54 substantially expands and re-organizes S2P2J's existing coverage of defendant structured settlement disclosure issues. Topics addressed:

• State structured settlement protection act requirements
• Product disclosures and representations
  • Cost or Value
  • NAIC Annuity Disclosure Model Regulation
  • NAIC Suitability in Annuity Transactions Model Regulation
  • Compensation disclosure
  • "Guaranteed" payments
  • Dissipation studies
  • Public assistance
  • Annuity ownership and rights
  • Taxation
  • Financial condition of funding entities
• Conflicts of interest
• Medicaid/Medicare disclosures
• Securities issues
• Class action lawsuits vs. defendants
• Meeting professional responsibilities

Structured Settlement Consultants - Release 54 expands and updates S2P2J's coverage of structured settlement consultants to address: consultant selection criteria; structured settlement product suitability; and consultant business practice issues including laws and regulations, industry standards, commission disputes, privacy rules, and disclosure and representation requirements.

Insurance Company Insolvencies - Release 54 expands and updates S2P2J's already extensive coverage of insurance company insolvencies including state insurance guaranty associations and the most recent developments impacting Executive Life of New York [ELNY] and Reliance Insurance Company. Following ELNY's 22 years of New York State supervised "rehabilitation", S2P2J's Release 54 identifies lessons that potential structured settlement recipients and their attorneys and advisers can and should learn from the ELNY debacle.

Medicare Set-Aside Arrangements - Release 54 re-organizes and promotes S2P2J's coverage of Medicare set-aside arrangements (MSAs) with updated materials for both workers compensation (WC) MSAs and liability MSAs. These updates include an extensive summary and analysis of the structured settlement provisions in the new CMS WCMSA Reference Guide as well as conclusions and recommendations for utilizing MSAs in personal injury liability cases.

Re-cycled Structured Settlement Payment Rights - As low interest rates continue to negatively impact the primary structured settlement market, new products featuring re-cycled structured settlement payment rights have begun to proliferate as funding alternatives for personal injury periodic payment settlements. Release 54 features a new section with detailed diagrams and charts (designed by Timothy Morbach) to explain the several variations of these products. In addition, this new section compares the features of these products with traditional structured settlements and summarizes recent investor warnings about these products issued by the SEC and FINRA.

Securitization of Structured Settlement Payment Rights - S2P2J already includes a detailed Chapter 16 titled "Transfers of Structured Settlement Payment Rights" which provides comprehensive coverage of most structured settlement secondary market issues. This coverage includes: the history of the secondary market; summary and analysis of IRC section 5891 and the state structured settlement protection acts; and how judges review (or should review) transfer applications. Release 54 adds a new section, with detailed diagrams and charts (designed by Timothy Morbach), explaining how securitization of structured settlement payment rights works.

Australia Structured Settlement Update - S2P2J continues to track structured settlement developments in countries outside the United States including Canada, the United Kingdom, Continental Europe, Australia and New Zealand. Release 54 highlights a recent legislative development in Australia called “The Lifetime Care and Support Scheme” which provides treatment, rehabilitation and attendant care services to people severely injured in automobile accidents. At least one Australian structured settlement expert believes this legislative development could prevent an annuity-funded structured settlement market from developing in Australia anytime soon.

"Structured Settlements and Periodic Payment Judgments" is a complete reference work for attorneys, settlement planners, structured settlement consultants, risk managers, liability insurers, annuity providers and secondary market participants. It is available in both hardcopy and online versions which are updated semi-annually. For highlights from previous S2P2J updates, see the structured settlement wiki.

SEC Bulletin Addresses Structured Settlement Transfers

The Securities and Exchange Commission (SEC) Office of Investor Education and Advocacy has issued an Investor Bulletin titled "Pension or Settlement Income Streams: What You Need to Know Before Buying or Selling Them". 

Although the SEC Investor Bulletin "is neither a legal interpretation nor a statement of SEC policy" it provides advice for individuals who are contemplating selling or purchasing (as investors) structured settlement payment rights and/or future pension payments.

The Investor Bulletin highlights questions potential sellers and investors should ask before proceeding with proposed transactions.

For sellers:

• "Is the transaction legal?"
• "Is the transaction worth the cost?"
• "What is the reputation of the company offering the lump sum?"
• "Will the factoring company require life insurance?"
• "What are the tax consequences?"
• "Does the sale fit your longer term financial goals?"

For investors:

• "Is the financial professional selling the product registered with a state or federal regulator or with FINRA?"
• "How is the salesperson being compensated?"
• "Is the salesperson authorized to sell this product?"
• "What is the reputation of the company selling the product to me?"
• "What are the tax consequences?"
• "What organization is ultimately paying you?"
• "Who is sending the check?"

To check the registration status of a salesperson, the SEC Bulletin recommends investors check these resources:

• The SEC's Investment Adviser Public Disclosure (IAPD) website.
• FINRA's BrokerCheck or telephone number (800-289-9999).
• Your state securities regulator.
• The NAIC's website or telephone number (866-470-6242) for your state's insurance commission.

The SEC's Investor Bulletin includes a number of additional warnings and resource links and concludes with the following admonition:

"Whether you are thinking about selling a pension or structured settlement, or buying one from someone else, remember that the risks in doing so are substantial and the safety net if things go wrong may not be very strong. Don’t shy away from asking probing questions—and shop around. there may be less risky alternatives to help you achieve your financial objectives."

Also note: The SEC Investor Bulletin provides a generic definition for a structured settlement plus an indirect reference to state structured settlement protection statutes. It does not, however, specifically reference or discuss the definitions, requirements and protections for structured settlement transfers provided in:

• Internal Revenue Code section 5891; and
• The state structured settlement protection statutes.

For a detailed analysis of transfers of structured settlement payment rights, see Chapter 16 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

For S2KM's complete reporting about the structured settlement secondary market, see the structured settlement wiki.